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30th June 2014

Singapore Economy

Tighter squeeze on foreign labour

Source: Straits Times

Companies already grappling with the manpower
crunch and escalating labour costs will take yet another hit tomorrow when
the latest round of foreign worker levy hikes kick in. While the
labour-intensive construction, food and beverage, hospitality and retail
sectors will bear the brunt of the rise again, firms say they have had time to
factor in higher costs, given that the increase was announced last year.

[SINGAPORE] The new breed of industrial buildings rolled out by
JTC Corporation may well give small and medium-sized enterprises (SMEs) - used
to doing everything themselves - cause to think about how to run their
businesses.

"If you look at MNCs, they tend to specialise and outsource
things that are non-core. But this may not be the case for our SMEs," says
JTC CEO Png Cheong Boon.

"For example, a food manufacturer tends to have its own
delivery trucks and warehouse. Therefore, it ends up having to provide services
such as delivery and warehousing on top of its core manufacturing and it
doesn't enjoy the economies of scale that come along with outsourcing such
services to a specialised operator.

"We encourage companies operating in our space to redesign
their processes and consider outsourcing. In that sense, we are trying to use
our innovative spaces to support and in some ways accelerate the transformation
of our industries."

The future JTC Food Hub in Senoko, for instance, will feature
shared integrated cold-room warehouse facilities operated by a third-party
logistics service provider, who will in turn offer a full suite of logistics
services to tenants.

This is a challenge for business owners in that they have to
relook existing assets or employees, and it requires them to review their
business models, acknowledges Mr Png.

"Our sense is that when companies looking for more space are
faced with this kind of growth opportunity, and resources are tight, they tend
to be more open to figuring new things out," he said.

The Food Hub (due to be completed by 2017) is not the first of the
innovative spaces to be rolled out by JTC, which has in recent years stepped up
the development of its built facilities.

The high-rise multi-tenanted Surface Engineering Hub in Tanjong
Kling, for instance, clusters companies to generate economies of scale,
synergies and partnership opportunities between the companies. In addition, the
firms are able to leverage the centralised wastewater treatment plant, which
helps reduce operating costs over time.

"JTC no longer builds 'plain vanilla factories' as this is a
segment well served by private developers. Instead, we are stepping up efforts
to plug the market gap by building the next-generation industrial facilities
with innovative and productivity-enabling features - which the private sector
may not be able to provide," said Mr Png.

As part of JTC' s plans to roll out 16 innovative spaces, the
agency is also looking at ways to transform and upgrade the furniture and
furniture-related industry, as well as concepts on the drawing board that
include plans for a poultry processing plant, a chemicals hub and, in the
longer term, a multi-user shipyard.

In the meantime, JTC is also stepping up its engagement and
discussions with various trade associations.

"Now, we are working more with trade and industry
associations to see what are their issues on the ground, what are their land
and space needs, and whether there is something JTC can do to help or
facilitate," said Mr Png.

"And because associations are more aware of what we are doing
and what we can do, they are also a lot more forthcoming in sharing their
requirements with us."

[KUALA LUMPUR] Malaysia's economy is expected to maintain growth
this year barring a slide in domestic consumer sentiment or a drop in external
demand, The Star reported.

The unexpected 6.2 per cent year-on-year gross domestic product
(GDP) rise in the first quarter was the highest since the fourth quarter of
2012. Much of the expansion was due to rising exports and resilient domestic
demand.

Several economists have even revised their growth forecast upwards
for 2014 with Alliance Research chief economist Manokaran Mottain projecting a
5.3 per cent year-on-year rise in GDP while UBS Investment Bank's senior Asean
economist Edward Teather expects a 5.5 per cent rise. Both had earlier
projected growth of 5 per cent, The Star report said.

However, the longer term outlook of the economy is still
uncertain. A January working paper on potential growth in emerging Asia by the
International Monetary Fund's senior Asia Pacific economist Rahul Anand and
team shows that the Malaysian economy (as well as Indonesia, Philippines,
Thailand, and Vietnam) is still performing below its potential.

[NEW YORK] A year ago, buying foreclosed homes to rent out was the
sure-thing trade for investment firms backed by money from private equity
companies, hedge funds and pension systems. But with the supply of cheap
foreclosed homes dwindling, some early investors are looking to cash out a bit
by flipping homes to competitors.

The Waypoint Real Estate Group, one of the first companies to
raise money from private investors to buy foreclosed homes, is quietly shopping
as many as 2,000 houses in California that it acquired in the last few years in
several private investment funds, said three people who had been briefed on the
matter but were not authorised to discuss it.

The homes, which are largely rented, are being shown to other
companies backed by investor money that have also scooped up distressed houses
in states including Arizona, California, Florida, Georgia, Illinois and Nevada.

Waypoint is considering selling about half of its 4,000 homes.
Some of the biggest institutional investors in the market for foreclosed homes
- companies such as the Blackstone Group, American Homes 4 Rent and American
Residential Properties - have slowed their pace of acquisitions in response to
an increase in home prices and a dearth of foreclosed homes that do not require
significant renovation.

[CALABASAS, California] Martin and Cindy Arroyo knew they were not
ideal candidates for a home loan.

She had gone through a foreclosure after losing her job, and he
was finishing his MBA and had not yet found his current job. But they had
managed to put together a down payment of more than US$550,000, or
three-quarters of the asking price for a four-bedroom house in Los Gatos, and
thought they would find a bank willing to lend the rest. They didn't.

So the Arroyos found an alternative: a sub-prime mortgage.

Despite the notoriety that sub-prime loans gained as a prime cause
of the financial crisis, they are re-emerging, under much more careful control,
as one answer to the tight lending standards that have shut out millions of
would-be homeowners.